The Nairobi Expressway, hailed as Kenya’s first major private-public partnership (PPP) project, has reported a Sh1.2 billion loss for the period between July 2023 and June 30, 2024.
Treasury disclosures tabled in Parliament recently highlight the ongoing struggles of the project, which has yet to meet its financial expectations.
The expressway, which was designed to reduce travel time from Jomo Kenyatta International Airport (JKIA) to Nairobi’s Central Business District (CBD) from two hours to just 20 minutes, generated Sh4.6 billion in revenue.
However, the operational costs, largely borne by the Chinese investor, China Roads and Bridges Construction (CRBC), amounted to Sh5.8 billion during the same period.
This has left the project operating at a loss despite its strategic importance in Kenya’s transport sector.
Challenges Affecting Financial Viability
The Nairobi Expressway, a flagship project under China’s Belt and Road Initiative, has faced several financial hurdles, with traffic volumes not meeting expectations.
Managed by Moja Expressway, a subsidiary of CRBC, the highway currently sees an average of 11,000 vehicles per day, far below the target set in the project’s financing model.
The toll collection is done in Kenyan Shillings, but since the investor’s financing facility was taken in US dollars, the conversion process has been a major drain on revenue.
Currency fluctuations and higher interest rates have compounded the challenges, with the investor facing an exchange rate loss of up to 38% on collected tolls.
“We bear the loss again and again,” an official from Moja Expressway said. “Every shilling collected is converted to USD, and with the ongoing exchange rate fluctuations, it’s becoming increasingly difficult to break even.
The toll rates are vital to sustaining the project and providing the investor with confidence.”
Government and Investor Response
Despite these challenges, the Nairobi Expressway does not carry a financial burden for Kenyan taxpayers, as it is entirely funded by the Chinese investor.
The agreement between the government and CRBC outlines a 30-year period during which the investor will operate and maintain the expressway to recover its investment.
However, the Kenyan government has been slow to adjust toll rates in response to the financial challenges faced by Moja Expressway.
The last review was carried out in January 2024, two years into the project’s operations.
While the agreement allows for annual toll rate adjustments, the government has reportedly been cautious about increasing rates further due to the tough economic conditions affecting the population.
“We need to increase the toll rates, but we will not. The cost will be borne by the operator,” an official from the Kenya National Highways Authority (Kenha) said.
The balancing act of keeping tolls affordable for motorists while ensuring the investor remains confident in the project’s future remains a delicate issue.
Other PPP Projects Perform Better
While the Nairobi Expressway struggles, other PPP projects are performing better financially.
The 35MW Sosian Menengai geothermal power plant, for example, reported a Sh2.3 billion profit, while the roads annuity scheme posted a profit of Sh350 million.
These projects have found more success in meeting their financial targets, highlighting the unique challenges faced by the expressway in an environment of fluctuating traffic numbers and economic pressures.
Looking Ahead
For now, the Nairobi Expressway’s financial outlook remains uncertain, with the project still a few steps away from breaking even.
It will be crucial for Moja Expressway and the government to find ways to boost traffic numbers and possibly adjust toll rates to ensure the long-term sustainability of this flagship infrastructure project.
